Places a limit on the personal income tax levy by New York state

Title of bill

An act to amend the tax law, in relation to placing a limit upon the personal income tax by the state of New York

Purpose

This bill imposes a cap on the levy collected by the personal income tax by New York State. In the event the cap is exceeded, rebate checks will be mailed to all New York taxpayers. This bill seeks to prevent any future tax levy increases over a certain allowable growth factor while making New York's income tax system more progressive over time.

Summary of provisions

Section 1 establishes a cap on the levy of the personal income tax and establishes a rebate check program if receipts exceed this levy cap.

Section 2 states that this act shall take effect immediately.

Justification

In New York, income taxes account for more revenue than any other type of tax. At the same time, the income tax is one of the most burdensome taxes. It takes money directly out of consumers' paychecks, disincentivizing work and reducing consumption.

The average New Yorker pays far too much in income taxes. It is no accident that New York State has lagged in job creation and been a leader in out-of-state migration while zero income tax states like Texas and Florida have seen an influx of both businesses and individuals. This bill seeks to prevent further increases to New York State's income taxes by capping the total income tax levy at the 2013-14 fiscal year amount plus a growth factor.

Importantly, this growth factor is a value that is historically smaller than the increase in total income from state taxpayers. This will result in income taxes consuming less and less as a percentage of the New York economy every year. With incomes rising faster than the rate of inflation, this bill will provide the impetus for government to reduce tax rates every year in order to stay under the cap.

If, however, no agreement to reduce tax rates are made during a given year, this bill automatically makes the income tax code more progressive by providing a rebate to each taxpayer of an equal amount, up to the amount they paid in taxes, for the total amount of income tax revenue in excess of the cap. If a taxpayer making $40,000 receives a $500 tax rebate, a taxpayer making $40,000,000 would receive the same $500 tax rebate. In the absence of other reform, this bill does not create a tax cut for just the wealthy or just the middle class, but instead an equal tax rebate for all taxpayers. This bill will send the signal that New York is committed to controlling the growth of its income tax and will not use reform of the tax code to disguise a net tax increase. Small businesses, many of which are subject to the income tax, need certainty to make intelligent investments in personnel and equipment. This bill will give them confidence that New York will not change the economic rules on small businesses year to year.

This bill will also ensure that all New Yorkers will share in the prosperity as incomes grow. As the number of individuals making high incomes increases, all taxpayers will see their yearly rebate checks grow.

Legislative history

2013-14: S.152-A Referred to Investigations & Government Operations 2011-12: S.6122 Referred to Investigations & Government Operations

Effective date

This act shall take effect immediately.